CAPI 7.2.2 What must be included in financial condition reports?

(1) A financial condition report must include, at a minimum—
(a) the business overview described in subrule (2); and
(b) an assessment of the suitability and adequacy of the firm's risk management policy; and
(c) an assessment of the firm's experience and profitability for the year ending on the valuation date; and
(d) an assessment of the value of the firm's insurance liabilities; and
(e) an assessment of the adequacy of past estimates of the value of insurance liabilities, especially if there has been a change in the assumption or in the valuation method used by the firm since the last valuation; and
(f) an explanation of the following matters relating to the valuation of insurance liabilities:
(i) the assumptions used in the valuation process, including assumptions about inflation and discount rates, future expense rates and, if relevant, future investment income;
(ii) the adequacy and appropriateness of data made available to the reporting actuary by the firm;
(iii) the procedures undertaken by the reporting actuary to assess the reliability of the data;
(iv) the model or models used by the reporting actuary;
(v) the approach taken to estimate the variability of the estimate;
(vi) the sensitivity analyses undertaken; and
(g) if the firm conducts long term insurance business — a determination of the value of surplus (the surplus determination) in each long term insurance fund established by the firm.

Note A surplus determination is required before any distribution of surplus is made under rule 8.4.2 (Assets not to be transferred for other purposes) or rule 8.4.4 (Distributions by firm or cell deemed to constitute single long term insurance fund).
(2) For subrule (1) (a), the business overview must—
(a) describe how the firm operates, including reinsurance arrangements made by the firm; and
(b) state whether the reporting actuary considers the reinsurance arrangements suitable and adequate and the reasons why the reporting actuary considers them to be so; and
(c) describe the documentation for reinsurance arrangements; and
(d) state whether the firm has limited risk transfer arrangements and, if it has, describe the impact of the arrangements; and
(e) comment on the pricing of the firm's products, including the adequacy of premiums; and
(f) include any other general matter that is relevant to, and that gives a general understanding of, the firm's business.
Derived from QFCRA RM/2011-1 (as from 1st July 2011)